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Interleague Competition and §2 of the Sherman Act

Interleague Competition and §2 of the Sherman Act. Sports law fall 2010. Hornbook Law on Monopolization. Section 2 bars “monopolization” or “attempted monopolization” of “any part of trade or commerce” Two key elements

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Interleague Competition and §2 of the Sherman Act

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  1. Interleague Competition and §2 of the Sherman Act Sports law fall 2010

  2. Hornbook Law on Monopolization • Section 2 bars “monopolization” or “attempted monopolization” of “any part of trade or commerce” • Two key elements • monopoly power (or dangerous probability of obtaining power for attempt) in relevant market • “wilful maintenance or acquisition of power”

  3. Finding Monopoly Power • Define “relevant market” • Define in terms of products/services and geography • Very complicated antitrust issue: “no more definite rule than that commodities reasonably interchangeably by consumers for the same purposes” are in the market (duPont (Cellophane) p701) • Precedents: boxing, other professional sports constitute a relevant market

  4. Identifying Illegal Conduct • Focus is on excluding rivals, not on the “mere exercise” of monopoly power • Distinguish between exclusion by efficient, pro-consumer conduct (“superior skill, foresight, and industry”) and improper means

  5. Policy Issue: competition is desirable • The Sherman Act presumes that competition is a good thing and monopoly is not • Not a defense that the public would be better off with a single sports league • Not a defense that a monopoly sports league will spend $ on worthy causes • Congress is free to exempt sports from antitrust laws and regulate them

  6. Hypothetical: MLB Response to the Continental League • Potential §2 claims • illegal expansion • reserve clause • stadium exclusivity • TV contracts

  7. Expansion • Did MLB have monopoly power -- the power to exclude competing baseball leagues -- in the national market? • What about competition from other sports/ entertainment? • Is anything else "reasonably interchangeable by consumers for the same purpose“?

  8. /2 Expansion • Can you distinguish the Continental League’s holding from that of AFL v NFL? • Was MLB’s expansion motivated by the desire to put the Continental League out of business?

  9. Labor market competition between 2 leagues • How does the reserve clause restrict the Continental League’s ability to compete? • Does MLB need the reserve clause to promote competitive balance and develop players?

  10. /2 Labor • NBA CLAIMED DURING ABA WAR: "teams are quite literally forced, by the need to maintain major league status, to bid against each other annually for those college players entering professional ranks ... The yearly bidding war ... will inexorably end in ruin. Yet neither league can unilaterally retreat from that war, for to do so would be equally ruinous to it."

  11. Stadia as essential facilities • Today, renting someone else’s stadium less viable in medium-/ long-term • Short-term elements of essential facility doctrine (1) duplication infeasible; (2) severe handicap on new league (3) no hardship to share

  12. TV Access • Are network contracts essential facilities?

  13. Sports Leagues as Natural Monopolies • Still can’t exclude rivals • Fact that leagues don’t compete does not necessarily mean they can’t • history of predation • merger strategy for entrants

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